Fortune Reit increases FY18 DPU 1% to 51.28 HK cents on positive rental reversions

FORTUNE Real Estate Investment Trust (Reit) will pay out 51.28 Hong Kong cents per unit for 2018, 1 per cent more than its 2017 distribution, as the residential and retail trust reported positive rental reversions and increased car park income in its latest fiscal year.

Income available for distribution to unitholders increased 1.6 per cent to HK$986.2 million as net property income gained 1 per cent to HK$1.5 billion for the year ended Dec 31, 2018, said the manager of the trust. Fortune Reit has a primary listing in Hong Kong and a secondary listing in Singapore.

The trust, which pays out its distribution on a semi-annual basis, will pay a final distribution of 24.94 HK cents for the second half of 2018 on March 1, 2019. Fortune Reit's stock closed at HK$9.70 on Monday on the Singapore Exchange, down 0.6 per cent or six HK cents, before the results were announced.

Revenue grew by 0.2 per cent to HK$1.9 billion as the trust's portfolio saw rental reversion of 12.7 per cent for renewals over the year. Portfolio occupancy was 93.1 per cent as at end-2018, down from the year-ago rate of 98.1 per cent due to major renovations at Fortune Kingswood, the trust's largest mall. Tenant retention rate was 68 per cent amid the ongoing asset enhancement works. Completion of the renovations, which began in June 2018, is expected in phases by end-2019.

Across the portfolio, Fortune Reit has 1,299 tenants, of which the top 10 contributed about 27.7 per cent of gross rental income and occupied about 18.3 per cent of total gross rentable area of three million square feet.

Fortune Reit's net asset value per unit rose 18.2 per cent to HK$16.61 as at end-2018 as the valuation of its properties grew 11.3 per cent to HK$42 billion. Total borrowings represented 20.9 per cent of gross assets as of Dec 31, 2018, lower than the 27.4 per cent gearing ratio as at end-2017. The trust has hedged interest costs on 57 per cent of outstanding debt to manage exposure to interest rate volatility.

Looking ahead, the trust manager expects favourable support for the non-discretionary retail business on the back of Hong Kong's positive job and income conditions. However, weaker stock and housing markets could present headwinds, the trust manager said.